Semiconductor Revenue To Decline In 2023, Gartner Warns

Analyst house Gartner has issued a forecast that confirms the ongoing weak demand for electronics, amid the uncertain global economy.

In its “Semiconductors and Electronics Forecast Database, Worldwide, 1Q23 Update,” (account required) Gartner projected that during 2023 semiconductor revenue will experience a notable decline.

Earlier this week the head of the world’s largest supplier of chipmaking equipment, ASML Holding, warned of the uncertainty facing the chip industry in light of regional subsidies and trade restrictions with China.

Semiconductor decline

That warning came after years of chip shortages during the Covid-19 pandemic, the tech sector is currently facing an oversupply of semiconductors, as global PC shipments continue to decline by as much as 30 percent.

Now Gartner has forecasts that worldwide semiconductor revenue will decline 11.2 percent in 2023.

In 2022, the market totalled $599.6 billion, which was marginal growth of 0.2 percent from 2021.

Gartner has forecast that global semiconductor revenue will total $532 billion in 2023, but in 2024 things look much rosier, with Gartner forecasting growth of 18.5 percent to $630.9bn.

“As economic headwinds persist, weak end-market electronics demand is spreading from consumers to businesses, creating an uncertain investment environment,” said Richard Gordon, practice VP at Gartner.

“In addition, an oversupply of chips which is elevating inventories and reducing chip prices, is accelerating the decline of the semiconductor market this year,” Gordon added.

Memory sector

Moving away from semiconductors and onto memory, Gartner noted that the memory industry is dealing with overcapacity and excess inventory, which will continue to put significant pressure on average selling prices (ASPs) in 2023.

Gartner said the memory market is projected to total $92.3 billion, a decline of 35.5 percent in 2023. However, it is on pace to rebound in 2024 with a 70 percent increase.

The analyst group noted that the DRAM market will witness significant oversupply for most of 2023 due to weak end-equipment demand and high inventory levels despite flat bit production by DRAM vendors.

Gartner analysts foresee DRAM revenue will decline 39.4 percent in 2023 to total $47.6 billion. The market will move to undersupply in 2024 and DRAM revenue is set to increase 86.8 percent as pricing rebounds.

Over the next six months, Gartner expects the dynamics for the NAND market will be similar to the DRAM market.

However weak demand and significant vendor inventory will create oversupply resulting in strong price declines.

As a result, NAND revenue is projected to decline 32.9 percent to $38.9 billion in 2023. In 2024, NAND revenue is projected to increase 60.7 percent due to a deep supply shortage.

Long term challenges

“The semiconductor industry is facing a number of long-term challenges in the decade to come,” said Gordon. “The past decades of high volume, high-dollar content market drivers are coming to an end, notably in the PC, tablet and smartphone markets where technology innovation is lacking.”

Gartner noted that in addition, Covid-19 and the US and China trade tension have precipitated the deglobalisation trend and the rise of techno nationalism.

“Semiconductors today are seen as a national security issue,” said Gordon. “Governments around the world are scrambling to build self-sufficiency in the semiconductor and electronics supply chain. This is leading the incentivisation of onshoring initiatives across the world.”

Gartner added that the PC, tablet and smartphone semiconductor markets are stagnating. The combined markets will represent 31 percent of semiconductor revenue in 2023 and total $167.6 billion.

“These high-volume markets have saturated and become replacement markets devoid of compelling technology innovation,” said Gordon.

In parallel, both the automotive and industrial, military/civil aerospace semiconductor markets will achieve growth, Gartner said. The automotive semiconductor market is forecast to grow 13.8 percent, reaching $76.9 billion in 2023.

“End-market demand will be less exposed to consumer discretionary spending and more exposed to business capital spending,” Gordon concluded. “Supply chains will be more complex with many more intermediaries involved and varied channels to market, and to satisfy different end-market requirements, different types of capacity will be required”.